On 16 October 2010 Dr. Matolcsy György minister for national economy submitted the bill number T/1367 of the government on the modification of several acts including acts on taxes and contributions. According to the information available on the www.parlament.hu page the parliamentary procedure of the 136 page bill is urgent and also involves off-salary benefits so the cafeteria plans of 2011 are expected to transform in accordance with the currently negotiated bill. The whole text of the bill is downloadable at the above mentioned web address.
The ‘in-kind benefit’ denomination will be abolished
According to the bill the taxation of the in-kind benefits will be modified and the scope of elements belonging to the category of in-kind benefits will be tightened; in fact the ‘in-kind benefit’ denomination itself will be abolished.
The category of elements with preferential taxation remains
The act continues to determine a scope of elements within the off-salary benefits burdened with a preferential personal tax of 25% including the holiday voucher, the benefit provided in the form of catering (hot food voucher), the school benefit, the local travel pass and the health fund contribution and voluntary pension fund contribution paid by the employer. The requirements of preferential taxation, limits and personal scope of these elements remain unchanged.
Returning and new benefit elements in 2011
According to the submitted bill one of the old benefit elements of cafeteria plans may return. The cold food voucher was one of the popular elements of the benefit system for several years beside the hot food voucher. Now it can return to the companies’ cafeteria plans in 2011 and it can once again become popular belonging to the scope of elements with preferential taxation. In 2010 the cold food voucher was available in unlimited amount but with a 97.8% taxation so the majority of the employers eliminated it from the cafeteria plans and substituted it with the hot food voucher increased to its maximum. The bill provides that the maximum limit of preferential taxation for the hot food voucher remains HUF 18.000 however it is not disclosed yet what will be the maximum amount for the cold food voucher if it will be limited – similarly to its hot food counterpart. However it is easy to see that there is little chance for unlimited amount with preferential taxation.
It is also important to point out that in the free-choice cafeteria plan before the changes to the 2010 benefits the employee had to choose between the cold and the hot food voucher since both of these elements could not be claimed in the same month. The similar limitation is expected in 2011.
A new element in the off-salary benefit system is the so called renewal card. Currently just very little information is disclosed on this benefit however we know that this is such a noncash payment instrument to which the employer can load different sums of money up to an annual maximum of HUF 300.000 (also jointly from several providers) and it can be used as payment for services at providers contracted for its acceptance.
It is good news that this element may belong to the scope of elements with preferential taxation and its scope and usability will be regulated by a separate decree. It is expected that severe obligation will be linked to this element concerning registration and data reporting similarly to the holiday voucher since it will be inevitable to keep track of the sums arriving from different providers not to cross the border of preferential taxation.
The internet contribution benefit will be tightened
According to the bill the last remaining cafeteria plan element that is tax-exempt (up to the value of the invoice) will be transferred into an element with preferential taxation. The interesting part of the benefit is the fact that up to the amount of HUF 5000 a preferential personal income tax of 25% will be applied, however the part exceeding this limit will be subject to the normal rules of taxation which means that there is a maximum limit for the internet contribution benefit as well. It is unchanged that the benefit can be provided in the form of invoice or voucher and the invoice can be issued for the name of a close relative.
Changes to the payable tax
The tax burden of the off-salary benefits not belonging to the category of preferential taxation will be subject to advantageous change. According to the bill the tax burden of these benefits will be 16% that shall be paid based on 1.19 times of the value of the benefit, further contribution does not burden either the provider or the private person. This will be highly advantageous compared to the currently effective tax burden of 97.8% and this might enable the culture or even the gift voucher to return to the cafeteria plans with some modifications.
Let’s wait for the final decision!
It is important to know that in spite of the short time there is still a long way to go before the modifications of the current bill will be adopted as an act. We only tried to give an outline of the possibilities drafted by the bill.